National Express issues "defence document" against rebel shareholder

Thursday 5 May 2011 04.55 EDT
First published on Thursday 5 May 2011 04.55 EDT

National Express has issued an unscheduled and upbeat trading statement, in what the City is calling the first defence document against a rebel shareholder.

Ahead of its annual meeting next week, the transport group said third quarter revenues were up 5%, with normalised profit before tax up 30%. It said trading over Easter remained good, and the outlook for the rest of the year was encouraging. It is continuing to look for new non-executives to beef up the board. Dean Finch, chief executive, said:

Our continued cost control initiatives and increased investment programme are both bearing fruit and demonstrate out strategy is sound and will deliver significant shareholder value over the long term.

This of course is a challenge to US hedge fund Elliott Advisors, which has a 17.5% stake and wants a boardroom shake up as well as a breakup of the business. Another major shareholder, Spain's Cosmen family with 17.4%, has so far not commented on its position, although Elliott has claimed to have its support. But several corporate governance activists have backed National Express.

The trading update - originally due at the same time as the agm - has lifted its shares 1.6p to 259.6p, and analyst John Lawson at Investec said:

The statement reads to us like a first defence document against unwelcome activism by at least one major shareholder, albeit there are some encouraging aspects (such as six conversion contract wins in the North American student business). Hence, we think shareholders should sit tight and see how this develops.

Still with transport Go-Ahead is the biggest riser in the FTSE 250 after it said full year operating profits would be ahead of previous expectations. It said a 7.2% increase in bus passengers during the third quarter showed people were increasingly leaving their cars at home. Rail numbers rose 5.8%. Chief executive Keith Ludeman said:

The public is struggling with the current high levels of fuel pricing and many are now choosing the better value alternative of the bus.
The growth in passengers on our trains - many of which serve London - also suggests that employement levels and discretionary journeys remain robust in the capital.

The company said its fuel requirements were hedged for the current year and next at an average 41p a litre. But it still expressed some caution about the medium term prospects for the overall economy. Still, its shares are up 103p at £15.03.

In a hold note analyst Paul Hickman at Peel Hunt said:

The overall issue for Go-Ahead is to find market opportunities. These could be rail franchises (shortlisted for Anglia), bus company acquisitions, or possibly the US. Meanwhile we believe the 5.8% yield is secure.